Standing Committee F

[Mr. Joe Benton in the Chair]

Finance Bill

(Except clauses 4, 19, 23, 26 to 29, 87 to 92, 131 and 134 and schedules 1, 5 and 38) 
 Schedule 3 agreed to. 
 Clauses 7 to 12 ordered to stand part of the Bill. 
 Schedule 4 agreed to.

Clause 13 - General betting duty: spread bets

Question proposed, That the clause stand part of the Bill.

Howard Flight: I welcome you to the Chair, Mr. Benton.
 Can the Minister confirm that the industry and financial services are happy with the new definition? I have not received any objections and I presume that there was consultation on the matter.

Dawn Primarolo: I confirm that there was consultation and that the industry and financial services are happy with the definition in the clause.
 Question put and agreed to. 
 Clause 13 ordered to stand part of the Bill.

Clause 14 - General betting duty: overseas bet-brokers

Christopher Chope: Will the Minister explain how these provisions are consistent with European Union law and the open market? It seems to be a protectionist measure and I had assumed, perhaps naively and not being a betting man, that there was an open market in betting within the EU. I had understood that one of the rationales for having our own national lottery was that if we did not, other European Union countries could sell their lottery tickets in this country.
 Perhaps the Paymaster General will also address the issue of internet betting-- another subject with which I am not familiar--which may be affected by the clause.

Peter Luff: Strictly for information, it would be helpful if the Paymaster General could give us some guidance on the treatment of the Channel Islands and the Isle of Man under the clause.

Dawn Primarolo: I am still thinking about the Channel Islands and the Isle of Man. They seem to follow me everywhere--
 Mr. Luff: Be nice to them. 
 Dawn Primarolo: I am extremely pleasant to them--

Peter Luff: I am sure that we shall be inspired.

Dawn Primarolo: Always, as a recent statement by Senators of the Jersey Parliament will testify.
 The hon. Member for Christchurch (Mr. Chope) asked whether the clause sits comfortably with European law. It does. It is common practice in member states closely to regulate the gambling industry. Like the hon. Gentleman, I cannot claim to have personal knowledge of the industry, but member states take different views on allowing gambling. The European Court of Justice decision on the Schindler case found that the United Kingdom was entitled to limit the distribution of material concerning the lottery. The Schindler ruling therefore supports the provision, which protects UK business from unfair competition and the UK betting customer from unwittingly betting with unregulated offshore bookmakers and brokers. 
 I cannot be drawn into offering hypothetical situations concerning what might happen if another country were to take a particular route on targeting. Although the provision on protection in advertising has hardly ever been used, it is necessary and is there in case we need to use it. As I said in my previous answer, it is to protect the UK betting industry from unfair competition and punters from unwittingly betting with unregulated bookies or brokers. 
 Of course, it is not always necessary to go as far as prosecution. When companies have breached the law in the past, what is politely called ''education and advice'' from customs officers has generally been sufficient to rectify the situation, and that approach will continue. 
 The hon. Member for Mid-Worcestershire (Mr. Luff) asked about the Channel Islands. I must be honest with him and state that we have not considered that dimension in terms of specific targeting. Although I would rather answer him on the record, I must say that I need to investigate further. I will send him a note that I will circulate to all members of the Committee. Should he wish to return to that question, I should be delighted to settle it with him. I do not believe that there is an issue there, but I should prefer to double-check and ensure that every member of the Committee is aware of the answer. 
 The provision is fully square with UK and European law. On anti-avoidance, the provision is there to protect and underline, and has never had to be enforced because we have used the persuasive powers of our customs officers.

Christopher Chope: Before the Paymaster General sits down, will she address the issue of the internet?

Dawn Primarolo: The whole clause is about the internet, and its heart is directed at dealing with internet betting in particular. The clause is based on European Community law and contains an anti-avoidance procedure. I do not know what will happen
 with regard to the Channel Islands, but I shall write a note. Customs officers are extremely persuasive, and we have always managed to avoid problems.

Christopher Chope: Will the hon. Lady explain how, when one is thinking about placing a bet on the internet, one knows whether an internet broker is based in the United Kingdom or overseas? That is a fundamental point that goes to the heart of the matter if we are creating new criminal offences.

Dawn Primarolo: To address the hon. Gentleman's point, perhaps it is best to explain how the provision will apply to online advertising.
 The primary aim of the clause, as the hon. Gentleman has identified, is to make it an offence for a person in the United Kingdom to advertise the services of a bet broker that is not located in the UK. The responsibility is on the person advertising, not on the individual who goes on to the internet. A person in the UK advertising such services must settle the issue. 
 We are levelling the playing field with bookmakers. The main vehicles for advertising betting services are industry publications, such as the Racing Post—I do not know whether the hon. Gentleman reads that avidly, but I do not—and text services on terrestrial television, which I have not scrutinised either. Online advertising is a narrow issue. 
 As hon. Members should be aware, the legitimacy of online advertising that originates in other European member states will ultimately be determined by reference to the e-commerce directive. Although that is intended to facilitate the proper functioning of the internal market by ensuring the free movement of information services, including advertising, it contains provisions to protect consumer interests. The change in the clause relates to protecting UK betting business from unfair competition, and UK punters from unwittingly betting in unregulated, offshore bookies and brokers; it does not relate to restricting legitimate competition. It will reinforce powers that are already in place. 
 If the hon. Member for Christchurch is asking me whether I guarantee that some bright spark will not find a way through, given the creativity of some who use the internet, I can say only that I would mislead the Committee to give such an undertaking. However, to the best of our knowledge from consulting industry and from looking at the way in which it operates, the clause provides the best protection for the industry and the punter that we can afford with the powers available.

Howard Flight: If a bookmaker in France, Gibraltar or wherever has a website, is there anything that we can do about someone looking up that website from the UK?

Dawn Primarolo: No, but I have tried to make it clear that the offence is committed by the person, or individual entity, who places the advertising on the internet. It is not an offence to bet with overseas bookmakers, but it is for bookmakers or brokers to
 advertise or promote services overseas. We are approaching the problem from the industry, not the individual punter, end. Hon. Members are stretching what little knowledge I have on betting almost to breaking point, but I am trying to be as clear as possible. The clause is not about individuals, but about regulating those who put advertising on the net in the first place.

Christopher Chope: I am grateful to the Paymaster General for explaining that, but can she say why it will be an offence for a person to be in possession of an advertisement? Surely, a consumer—a betting punter—may well want to store an advertisement on his computer. It seems that, by so doing, he will be committing an offence under the clause.

Dawn Primarolo: That brings us back to the issue of light touch, and the skills of Customs and Excise in recognising who has been carrying material and who is involved in the industry. The essential question is whether someone could be prosecuted for carrying the advertisements, even if that person were coming into the UK. The answer is no; he cannot be. If the hon. Gentleman were to do that and were stopped by Customs and Excise, he would have to ring the office of the Financial Secretary to the Treasury, which would immediately ensure that he was not prosecuted. He could not be prosecuted for carrying a paper or document carrying the advertisement. He would be guilty of an offence only if he distributed the advertisement or had brought it back with the express purpose of distributing it.
 I know that the question of how that would be decided is a delicate issue, so I shall rest my case on the point that I made earlier about the anti-avoidance mechanism—the good judgment and persuasive powers of Customs and Excise to tell the difference and to educate people about the matter have worked until now. There is no reason to believe that they will not work in the future.

Peter Luff: This is a very interesting issue. The more I think about it, the more fascinated I become. What will happen if a chap is on the internet one night, sees an advertisement for an overseas bookmaker, prints off the advertisement, goes down to the pub and says to his mates, ''Look, this is a better deal than the one at William Hill on the high street. Try this''? Is that person guilty of an offence?

Dawn Primarolo: As I understand it, that person would be spoken to should our powers of detection identify him. It would be explained to him that his action was unwise in terms of the protection of individual punters and that his friends and acquaintances might be a little cross if they then used such an advertisement and lost lots of money.

Peter Luff: Tricky.

Dawn Primarolo: It is a tricky issue.
 Question put and agreed to. 
 Clause 14 ordered to stand part of the Bill.

Clause 15 - Cars registered on or after 1st March 2001: rates of duty

Michael Jack: I beg to move amendment No. 32, in page 10, line 20, at end insert—
 ''( ) In paragraph 1B(b) of Schedule 1 to the Vehicle Excise and Registration Act 1994 (c.
 22) the words 'or the premium rate' are omitted.''.

Joe Benton: With this, it will be convenient to take the following amendments: No. 33, in page 10, line 21, leave out
''the Vehicle Excise and Registration Act 1994 (c. 22)''
 and insert ''that Act''. 
 No. 3, in page 10, line 27, leave out column 5. 
 No. 34, in page 10, line 35, at end insert— 
 ''(1A) In paragraph 1D of Schedule 1 to that Act, the words 'and is not liable to the 
 premium rate' are omitted. 
 (1B) Paragraph 1E of Schedule 1 to that Act is omitted.''.

Michael Jack: I regard the amendments as probing amendments that are designed to establish the logic behind the premium rate column in the table for vehicle excise duties in clause 15. The explanatory notes tell us that the clause principally amends the structure of the present arrangements for vehicle excise duty for cars first registered after 1 March 2001 to create
''a new low tax band for vehicles with emissions of 120 grammes of carbon dioxide per kilometre or less.'' 
I strongly applaud anything that encourages the improvement of automotive technology and reduces emissions, effectively making cars more environmentally friendly. 
 However, the thrust of the explanatory notes is to advise us that the principal objective of the clause is to reduce carbon dioxide emissions. It is interesting and slightly odd that the Treasury has decided, for reasons that I am sure it will explain, to discriminate in financial terms against the vehicle of choice given that carbon dioxide reduction is the principal objective even if the differential in the duty rate is only £10 between standard rate petrol vehicles and premium rate diesel vehicles. 
 I declare a personal interest: I drive a turbo-charged diesel Volkswagen and I have been assisted in producing some of the information that I shall put before the Committee by kind representations made to me by Delphi Automotive Systems, which makes the fuel injection equipment for, among others, Ford diesel cars.

Rob Marris: Will the right hon. Gentleman let the Committee know whether his turbo-charged Volkswagen diesel has a particulate filter?

Michael Jack: It does not have a particulate filter, but we will discuss particulates because the hon. Gentleman has some information about them. I am interested to hear his views on whether particulate measure PM10 or PM2.5 is the most appropriate to determine the
 impact of particulates on air quality and health matters. I am sure that we will come to that point in due course.
 The Volkswagen engine is highly efficient, but it is not the latest design. As we shall see, it does not produce the lowest particulate emission. The hon. Gentleman draws my attention to an important point. In any cohort of motor vehicles, there will be old ones that have inferior technology, those that have modern technology and those that have advanced technology. The real question to ask is what strategic reason the Government have for discriminating against diesel cars that will make even greater gains in emission technology than they have done already. We ought to encourage the development of improved vehicle technology. Had there been a sixth column, which praised the more modern diesel engine in monetary terms, I might not have tabled the amendment. However, there is no sixth column, so we have to concentrate on the fifth column. 
 I want to return to my initial point about carbon dioxide. Diesel vehicles produce 30 per cent. less carbon dioxide than petrol ones. If 50 per cent. of cars on the road in the United Kingdom were diesel, we would effectively be able to deliver a full 1 per cent. of our contribution towards the UK's Kyoto target commitments. That is important because we are considering Kyoto target achievements against the background that one of the major contributors, the nuclear power industry, is seeing the lifetime of current stations coming to an end. When the advanced gas-cooled reactors start to close after about 2010 or 2012, there will be some real problems to be borne, but I shall not digress. 
 I want to consider some of the key factors that are laid down concerning the parameters of emission outputs and their contribution to air quality. A number of European standards detail and guide us through what is happening in the world of diesel engines. In terms of emission standards, Euro II, introduced in 1997, Euro III, now currently being used, and Euro IV, a more advanced emission standard that comes into force in 2006, all clearly contain more demanding requirements for improved emissions of petrol and diesel. If we look at Euro II and its requirements on carbon monoxide—one of the key gases affecting air quality—we find that diesels are required to adhere to a standard of 1 g per km. In Euro III, that figure goes down to 0.64 g, and in Euro IV to 0.5 g. 
 What is interesting—this relates to the point made by the hon. Member for Wolverhampton, South-West (Rob Marris)—is that the latest technology, common rail diesel car engines, has already attained a rate of 0.3 g per km. Today's modern diesel engine cars are already beating the most stringent European standards on carbon monoxide, which are required to be introduced by 2006. The owner of a Ford Focus TDCi, the latest car from Ford with a common rail diesel engine, would pay a £10 premium. That is rather odd, because the car delivers a substantial advance in carbon dioxide reduction, makes a significant contribution to the conservation of hydrocarbon fuels 
 and more than beats even the most stringent carbon monoxide standard. On the measure combining hydrocarbons and nitrous oxide emissions, the figures—again, in grammes per kilometre—are 0.7 for Euro II, 0.72 for Euro III and 0.3 for Euro IV. The Ford Focus for 2006 is nearly there at 0.38. 
 The hon. Gentleman mentioned also mentioned particulates. If I understood the Financial Secretary's comments correctly when we were discussing biodiesel, we are dealing with a matter of considerable concern, and I recognise that. I do not want another long, detailed debate about air quality, given that many factors other than vehicle emissions affect it. However, it is evident that the measure of PM10, which describes particulate size and is currently used to delineate that aspect of vehicle performance, is a matter of debate even among the expert panel on air quality in this country. There is a question as to whether larger or smaller particulates have the worst health effects, but PM10 is the measure that is used at present. 
 The modern diesel car has made substantial progress in reducing particulate emissions. The table lists the standards—using the same nomenclature as before of grammes per kilometre—as 0.1 for Euro II, 0.05 for Euro III and 0.025 for Euro IV, which is the most exacting standard and will be introduced in 2008 for vehicles of up to nine seats. Already, the Ford Focus is at 0.03. The Ford diesel engine with the new common rail technology beats all the current standards and is just about at the technology for 2008. Again, if we are trying to encourage technological improvements so that we can deal with particulates, it is odd to discriminate against that particular technology. 
 There may be extremely good reasons to discriminate against the diesel engine. I hope that the Financial Secretary will provide the detailed analysis that justifies discriminating against an engine that achieves the principal objective of this clause, which is the reduction of carbon dioxide. My analysis shows that modern engines are already beating the standards.

Chris Grayling: My right hon. Friend is making important points about the benefits of the latest generation of diesel engines. Does he share my anxiety that Government fiscal policy in recent years has removed—indeed, reversed—the price advantage that diesel once had at the pump, adding a further incentive for people to turn from diesel to petrol cars, which are less environmentally friendly?

Michael Jack: I am certainly concerned about the matter. I have become somewhat of a diesel fuel price anorak since I acquired a vehicle with a diesel engine. In fairness, what is more of a problem than the Government's taxation on diesel is the way in which the oil companies maintain a 5p or 6p standing difference between petrol and diesel—that is the interesting issue. I have probed it with them. They tell me that it is all to do with the spot price of diesel on the Rotterdam market, but it is amazing that the
 differential never seems to change. I sense an element of cross-subsidisation between diesel and petrol. It is not for this Committee but for the competition authorities, perhaps, to examine how diesel is priced. Anyone who crosses the channel will be in for a feast of low-price diesel.
 10 am 
 On particulates, notwithstanding the technological aspects of the more exacting European standards that I mentioned a moment ago, I am reminded that today's cohort of diesel cars produces only 5 per cent. of the PM10 particulate measure that existed five years ago. Even without the benefit of common rail technology, diesel cars are becoming substantially better on perhaps the most sensitive of their emissions. For those reasons, I find it difficult to understand why the Government currently seek to discriminate financially, albeit in a modest way, against the diesel engine. I look forward to the Financial Secretary giving us a robust justification of the Government's position and an insight into why diesels have been singled out for that treatment.

Paul Boateng: The purpose of the clause is to establish a new lower rate of vehicle excise duty that recognises the benefits of cars with very low emissions of carbon dioxide.
 Cars first registered on or after 1 March 2001 pay vehicle excise duty according to their emissions of carbon dioxide as measured during the EU type approval test. There are currently four tax bands based on carbon dioxide with three tax rates within each of those for petrol, diesel and alternative-fuelled vehicles. The purpose of that system is to send a signal to vehicle manufacturers and users about the environmental impact of the cars that they make and buy. 
 Listening to the right hon. Gentleman's discourse, which was a pleasure even at this time of the day, one gets a sense of the complexity of the task that the Government have set themselves when they set out to deliver messages of that sort. Technology is ever advancing, and it is important that one seeks to reflect that so far as one can—I shall come on to one particular area of technological advance in a moment. At the end of the day, one sends out messages, as best one can, as technology advances. It would be a mistake for the Government to pretend that sending such messages out was an exact science in which it were possible exactly to balance the issues around the levels of particle emissions and carbon dioxide in a totally satisfactory way. Some of the messages will be more satisfactory than others, and one has to seek to get the balance right without introducing undue complexities and burdens for retailers and users alike. 
 The clause adds a fifth band to that structure to increase the incentives to choose the very cleanest cars, which are defined as vehicles that emit 120g per km or less of carbon dioxide. The tax rates in the new band are £30 below the existing lowest band, which will increase the incentive between the least and most efficient cars to £100 per year—a not insignificant sum of money. In the first instance, that will benefit more than 30,000 vehicles, including the most efficient 
 versions of the Ford Fiesta, Vauxhall Astra and Peugeot 206 as well as the hybrid electric-petrol Honda Insight and Toyota Prius. 
 The right hon. Gentleman's amendment, which I am grateful to him for describing as ''probing'', would have the effect of undermining the principled position at which we seek to arrive in the clause by suggesting that the premium rate for diesel should be abolished, despite the fact that many diesels are already in the lowest carbon dioxide band because of their high efficiency. We pointed out in our 1998 consultation on the reform of vehicle excise duty and the need to ensure a cleaner environment through that reform, that tax can and should be used to promote environmental objectives, such as curbing the growth of emissions, with the caveats around sending messages that I have outlined. 
 In our view, the current system of graduated VED does just that, taking into account carbon dioxide emissions but also, quite rightly, the local air quality emissions of different vehicle types. That is why there is a £10 discount for alternatively fuelled vehicles, such as hybrids and those using road fuel gas.

Chris Grayling: With hybrid vehicles, which might have a liquid petroleum gas engine and a petrol engine in the same car or an electric engine and a petrol engine in the same car, can the Minister explain what means the Treasury uses to assess the likely emissions? Cleary, each type of engine in those vehicles has entirely different performance and emission levels.

Paul Boateng: There would be some difficulty in determining the emissions from such a car without knowing how the owner was gong to use it and which choices they would make. We would seek to ensure that we had a sense of the emission from each fuel supply and the balance between them. We would then tax on the basis of what the owner chose to fill up on. That is the basic principle.
 The right hon. Member for Fylde (Mr. Jack) struck straight home on the issue of how to define the balance between carbon dioxide and local air pollutants. We have sought to reflect our targets for many different types of emissions, including those for carbon dioxide, as a result of the Kyoto protocol, and those set for local air pollutants through the national air quality strategy. It is important for Government fiscal policy to complement those targets, but it is not, as I said earlier, an exact science. We have never pretended that the £10 VED supplement for diesels is exactly equal to the extra-low local air pollution costs that are imposed. 
 The important point is to ensure that we monitor the development of diesel engines and make any changes considered necessary in the light of those developments in order to impact on vehicle emissions, and reflect that impact. On Euro IV diesel, one hopes that, in a couple of years, the right hon. Gentleman will be able to return to this Committee in exactly the same place that he is in now—I hope and pray that in four, five, six, seven or eight years' time he will return to the 
 House in exactly the same position—with a turbo-charged Euro IV diesel. By that time, we can expect to have ensured that, as the technology develops, the banding reflects those developments. 
 At the moment, on Euro IV—which will be as clean as its effective equivalent in terms of local air pollutants—we have taken the view that there are at present very few, if any, Euro IV diesel vehicles on the road. The tax system needs to take into account the existing stock of diesel vehicles, which are not Euro IV. We have not, therefore, made specific provision for Euro IV emission standards in the bands. However, the right hon. Gentlemen's point is perfectly fair. We shall ensure that we monitor developments in that field very carefully and shall, no doubt, reflect those changes in subsequent Finance Bills. 
 To return to the point made by the hon. Member for Epsom and Ewell (Chris Grayling), it will also be important to reflect developments in the technology of vehicles and mixes. For vehicles with two fuel types, the EU type approval process produces two CO2 figures and we take the lower. There will important developments and they will be monitored to ensure that subsequent Finance Bills take account of them. 
 I am grateful to the right hon. Member for Fylde for raising the matter. I hope that he accepts that we are sensitive to the points he properly raised and that he will not press his probing amendment to a vote.

John Burnett: We discussed this matter on 14 May when I made some points about diesel. The Financial Secretary gave us the benefit, in part, of the Government's philosophy on the taxation of diesel.
 There is some comfort--I wait to hear what the right hon. Member for Fylde has to say--in the fact that the Government are monitoring progress, especially of diesel technology, all the time. Although the Financial Secretary gave a fairly long time scale of five or six years and I hoped that it would be earlier, the Government are monitoring progress every year, particularly on Euro IV diesels. Ownership of those cars will become more common and I hope that, even before that, the Government will consider any changes that could be made in the duty regime to reflect the benign effect of the technology and to encourage further the manufacture and use of such engines.

Michael Jack: I am grateful to the Financial Secretary for the way in which he responded to these probing amendments. At the conclusion of my comments, I shall seek leave of the Committee to withdraw my amendment because I am heartened by what the Financial Secretary said.
 It is interesting that when the Government are slightly unsure of the basis on which they are acting, Ministers say a few words and then fall back on the technical knock-out clause: ''As I can't think of a better argument, I'll make sure the other side knows that there is a technical deficiency, so in no circumstances could the Treasury allow further progress.'' I was intrigued that the Financial Secretary did that after two sentences of argument on carbon 
 dioxide, but I would not want to be accused of undermining any economic signals that encourage the development of improved technology in motors vehicles. Quantum advances have been made to the efficiency of car engines, both petrol and diesel, during the past decade. 
 However, I was interested in the construction of the Financial Secretary's four lines of argument. In three of the four he rested his case on carbon dioxide being the principle measure by which vehicle emission improvement would be judged. Diesel engines, by any measure, win that argument hands down, whether the technology is yesterday's, today's or tomorrow's. That said, I acknowledge that measurements of air quality are complex and are not the province of motor vehicles alone. For example, bonfire night can rapidly transform the air quality of particular locations. That shows the difficulty of measuring air quality. 
 I am encouraged that the Government will monitor that, and I seek one or two assurances from the Financial Secretary. Will he assure me that between now and the next pre-Budget report, or Budget, he will meet with those who are more knowledgeable than I will ever be about diesel engine technology to discuss the change in technology as it applies to the cohort of diesel vehicles in the United Kingdom, so that the Government are as up-to-date as possible with what is happening from a trade point of view. 
 Secondly, and I would not blame the Financial Secretary if he were not able to assure me about this, will he reflect on whether the Government might be willing, if the newer technology is adopted at a more rapid rate than his current calculations suggest, to consider making further changes to the premium rate in order to encourage the best diesels while recognising that there may be problems with the older diesels?

Paul Boateng: I am happy to give the first assurance, but I am unwilling to give the second.

Michael Jack: I beg to ask leave to withdraw the amendment.
 Amendment, by leave, withdrawn. 
 Clause 15 ordered to stand part of the Bill.

Clause 16 - Vans registered on or after 1st march 2001: rates of duty

Question proposed, That the clause stand part of the Bill.

Christopher Chope: I wish to ask the Financial Secretary a couple of questions. Are there any vans on the market in the United Kingdom at the moment that would qualify under the clause? If there are, why are we saying that someone who purchases such a van before 1 March next year will never be able to qualify for reduced VED? Surely, anyone who is a pioneer and acquires a van that is environmentally friendly ought
 to benefit from the reduction in VED. I should be grateful if the Financial Secretary would respond to that point.

Chris Grayling: I have a couple of quick points to make. I would be interested to know whether the Financial Secretary is considering the extension of the clause in future Budgets. I say that because there is quite an extensive range of emission levels provision for most cars, and we are now seeing significant changes in the van market. As part of a recent Select Committee visit to Japan, I visited the Japanese Electronic Vehicles Association. It had on display the first of what I believe will be quite a substantial market for a new generation of low-emission vehicles that are not yet freely available in this country.
 As time goes by, we shall see more alternatives on the market, and more contradictions between relatively high-emission and relatively low-emission vehicles. Although the Government are putting forward a framework for cars that offers a significant range of incentives to purchase different sorts of vehicles, the same is not yet true of the van market. I should be grateful if the Financial Secretary would confirm that the Government might consider adjusting the very simple band structure as the market develops to reflect the broader range of vehicles that will be available.

Paul Boateng: The purpose of the clause is to establish a new lower rate of vehicle excise duty for vans meeting the Euro IV emissions standard to which I referred earlier. That is designed to offer an incentive to manufactures and purchasers to market and buy brands that meet the higher emission standards that will come into effect between 2005 and 2007. The clause provides that, from 1 March 2003, all newly registered vehicles that meet the Euro IV emission standard will pay a lower rate of duty of £105.
 The hon. Member for Christchurch asked why we could not introduce the change before March 2003 to benefit those at the vanguard of progress. [Interruption.] I am glad that the hon. Member for Arundel and South Downs (Mr. Flight) picked up on that—quick off the mark, as ever. I can understand his point, but, sadly, to be a pioneer is not always to reap the benefits that follow. The Driver and Vehicle Licensing Agency needs time to set up systems that capture information not currently held on the vehicle record, and it must come to an agreement with manufacturers and traders on how that can be done. 
 We are introducing the new rate as quickly as we practicably can. We do not currently capture information on the vehicle record of the Euro standard, and it is not easy to identify vehicles without it. However, we will be able to do that once the clause takes effect. I do not know exactly how many such vans, if any, are on our roads; there may be some.

Rob Marris: Does my right hon. Friend agree that electric milk floats, of which there are thousands, will come under the category?

Paul Boateng: I do not know that they come under category Euro IV. They are no doubt worthy vehicles, and they already receive some benefits. I cannot see how the benefits could be extended to any Euro IV vehicles out there.

Howard Flight: One understands why it is not practical to give the rate now, as everything must be in place, but if, after March 2003, existing vehicles meet the requirements, it seems unreasonable that they should not qualify for the new rate when in place—that was the second part of the question of my hon. Friend the Member for Christchurch. As I understand the clause, those vehicles that had not qualified on first registration will not qualify for the concession. Once everything is in place, if a vehicle meets that requirement, will it qualify?

Paul Boateng: That is a perfectly legitimate question. I should like to know whether any technical obstacles would prevent such an extension. I shall examine the issue.
 A few hybrid vans meet the Euro IV standard. We do not know the number as there is no means of identifying them exactly. I do not know whether milk floats will be among them; certainly, electrical vehicles are exempt from VED, and most milk floats are electrical. I hope that that explanation of the clause, and my willingness to consider finding a way around a technical hurdle that would not impose undue expense or burden on the Exchequer or fiscal authorities, will enable hon. Members to give the clause a fair wind.

Christopher Chope: I am grateful to the right hon. Gentleman. He says that he will consider whether vans that qualify but were registered before 1 March next year will subsequently qualify for the concession. I should be grateful if he would say whether he will report to Committee members in sufficient time to enable us to consider whether we should revert to the matter on Report.
 The Financial Secretary will probably know from his own constituency correspondence that many people who had acquired cars that should have qualified for reduced duty under the measure introduced for low-emission cars registered after spring 2001, would never be able to claim the reduced duty because they had purchased their cars in the previous six months or so and registered them before 1 March 2001. Bearing in mind that experience, the frustration that was caused and, frankly, the inability of Ministers to satisfy constituents who were adversely affected, I should be grateful if the Financial Secretary would reconsider the matter. The burden could be put on the car or van owner to supply the relevant information to the DVLA. With the help of the car manufacturer, it should all be available. Surely, we must be able to come up with a system that allows people who own vans that qualify under the scheme to benefit from it after 1 March next year, even if they acquired their vans prior to that date. I hope that the Financial Secretary will report on that before the end of the Committee, so that we can consider whether to revert to it on Report.

Paul Boateng: I hear what the hon. Gentleman says and shall write to him and other Committee members. However, I do not want to hold out too much hope. If Ministers could not satisfy the concerns about a category of vehicles in the past, and they will not, it may well be that we shall not be able to satisfy concerns about this category of vehicles either. One must not add undue administrative or financial burden or still more complexity to the system. As I said in my opening remarks, to be a pioneer is in itself a satisfaction, and that may have to be enough. However, I shall explore the issue and write to hon. Members.
 Question put and agreed to. 
 Clause 16 ordered to stand part of the Bill.

Clause 17 - Disclosure of information for vehicle excise duty exemptions

Question proposed, That the clause stand part of the Bill.

Paul Boateng: The purpose of the clause, which I shall introduce briefly, is to improve the vehicle relicensing service for disabled motorists and the keepers of vehicles used by disabled persons. Disabled people in receipt of certain qualifying benefits may be entitled to an exemption from vehicle excise duty. Proof of their disability allowance is in the form of a certificate issued by the Department for Work and Pensions or the Ministry of Defence, as appropriate, which must be produced when relicensing—that is, obtaining a nil licence—at the Post Office or DVLA regional office.
 The provisions in the clause are a prerequisite to obviating the need for a certificate to be produced when relicensing. They are part of Government proposals on e-licensing, in which the intention is to establish by 2005 the opportunity for all motorists to relicense by internet or telephone. 
 I believe that all members of the Committee will welcome the measure. Generally, it is an important step forward for e-business, but it will be particularly welcome to those living with disabilities. They have quite enough burdens to bear already, without having to engage in existing relicensing procedures. The more that we can do to relieve them of those burdens, the better.

Mark Field: Has the Financial Secretary given thought to precisely what the qualification will be for a disabled person? He mentioned provision through Government Departments. However, an increasing number of individuals are able to get disabled licences for their vehicles through their local authorities. Is it envisaged that the qualification will be such that a large group of disabled people will qualify under the provision, or do the Government feel that it should be a fairly small and tight group based on central, rather than local, Government provisions?

Paul Boateng: Our feeling is that a certificate, which will pick up those entitled to that particular exemption, should be issued by either the Department for Work and Pensions or the Ministry of Defence.
 Question put and agreed to. 
 Clause 17 ordered to stand part of the Bill.

Clause 18 - Motorcycles (and motorcycle trade licences): rates of duty

Question proposed, That the clause stand part of the Bill.

Paul Boateng: The purpose of the clause is to reform the structure of vehicle excise duty for motorcycles better to reflect the benefits that motorcycles offer, particularly where they substitute for cars. It contains a new structure of four tax rates based on engine size, which reflects the outcome of a major public consultation. I am sure that there is not a member of the Committee who has not received correspondence in the course of the past year on that issue, which excited a great deal of attention, particularly in the specialist press.
 At the time of last autumn's pre-Budget report, the Government published a consultation document on the objectives of the new motorcycle VED system and the structure that would best achieve them. The consultation document attracted more than 12,000 responses, and in creating the new structure set out in the clause we have listened to the respondents. Motorcycle groups have warmly welcomed the new VED structure. One of the main motorcycle publications, ''Motor Cycle Fleet News'', said: 
 ''We'll buy you a pint Gordon.'' 
It is all heart, and no doubt the pint would be from a small brewer, although I do not want to excite the interest of Opposition Members on that issue. 
 On the basis of those responses, we are proposing a new structure of motorcycle VED that not only reflects changes to the structure of the motorcycle fleet, but seeks to encourage smaller motorcycles, which bring congestion and climate-change benefits when used in place of cars. Under the new structure, there will be four tax bands based on engine size rather than the existing three bands. For many motorcyclists, rates of duty will fall by as much as £35, reflecting the principle that vehicle taxation should reflect use and environmental impacts rather than ownership. In total, some 600,000 motorcyclists will pay less duty under the new system.

Christopher Chope: I congratulate the Government on their enlightened approach, which is reflected in the clause. When I was the roads Minister many years ago, I was unable to persuade the powers that be that motorcycles should be treated in that way because the prevailing view at the heart of Government was that motorcycles were inherently dangerous, and therefore
 anything that was done to encourage their use was bad for both road safety and the wider economy. Obviously, different views now prevail, and I should like to put on record the fact that when I was the roads Minister I had free rides on very powerful motorcycles, but was never able to deliver anything in return. I recognise that the clause is a move in the right direction, and I congratulate the Government.

Edward Davey: I rise to congratulate the Government on a long-overdue measure, which I am sure will be welcomed by the many motorcyclists across the country, particularly the 600,000 of them whom we are told will benefit.
 I have a probing question for the Financial Secretary. Will he tell the Committee—I presume that this was because of the consultation—why the Government decided to base the structure of VED for motorcycles on engine size as opposed to CO2 emissions, which is the basis of the structure for motor vehicles?

Paul Boateng: I have served in Committees for many years, but I have never served in one in which there was such a warm and unqualified welcome from the Opposition for a clause.

Howard Flight: Beware.

Paul Boateng: It is funny that the hon. Member for Arundel and South Downs should say that, because from a sedentary position one of my hon. Friends said, ''I think that we should quit while we are ahead.'' I do not want to give the hon. Member for Epsom and Ewell any prospect of this particular ministerial team quitting. However, I warmly welcome the measure, because it shows a sometimes cynical wider world that, as the hon. Member for Christchurch said, the Government can have their mind changed by effective consultation.
 The hon. Gentleman is right in identifying the resistance to this measure. As a result of effective consultation and the Government being prepared for a change not only of heart but of mind, we have reached our current position. Motorcycle VED is still based on engine size because of the results of the consultation, as the hon. Member for Kingston and Surbiton (Mr. Davey) said. The industry association said that until carbon dioxide data become available, engine size is the only satisfactory and practical basis on which to set motorcycle VED. That was the overwhelming view, and we made our decision as a result of that. I am grateful to the Committee for its commendation of the clause. 
 Question put and agreed to. 
 Clause 18 ordered to stand part of the Bill.

Clause 20 - Calculating cylinder capacity of vehicles

Question proposed, That the clause stand part of the Bill.

Christopher Chope: I would like the Minister to explain, because some of us do not understand, how there can be more than one way of calculating cubic capacity. The clause appears to give powers to calculate cylinder capacities in different ways.

Paul Boateng: I do not think that the hon. Gentleman is alone in his response to the clause. Let me explain the thinking behind it. It was important that the Secretary of State should have the powers to calculate the cylinder capacity of all vehicle engines recognised in statute. Prior to 1999, cars and light vans paid a flat rate of vehicle excise duty. In June of that year, a reduced rate was introduced for certain vehicles based on their cylinder capacity. The relevant regulations defining how such capacity should be calculated was apparently only extended to motorcycles.
 There was not, therefore, a recognition in statute that the Secretary of State should fulfil such a role in relation to all vehicle engines. The provision corrects the position and grants the Secretary of State powers to calculate the cylinder capacity of all vehicles. We will all be reassured that the Secretary of State acts within powers in making what are, as the hon. Gentleman says, rather obvious calculations.

Michael Jack: I am afraid that I find the clause intriguing. What would happen if the vehicle manufacturer made its own calculation of the cubic capacity of an engine and there was a dispute between it and the Government over the matter? As far as I can tell—perhaps I have not studied the clause in the exacting, detailed manner that it deserves—the clause does not contain the formula by which such calculations would be made.
 Perhaps the Financial Secretary would tell me where I might find the mathematical formula. Cars are often described in populist terms as having engines with a capacity of 1.8 or 2 litres, whereas the capacity according to the vehicle manufacturer's definition may be 1 or 2 cu cm above or below that publicly stated capacity. That precise capacity as calculated by the manufacturer usually appears on the vehicle documents. How is that potential difference of opinion to be resolved? It could have quite a material effect on taxation. 
 Secondly, how will the formula deal with Wankel-type engines, which contain a different form of technology from the traditional normal cylinder arrangement? Will the clause enable the Financial Secretary to deal with future developments? 
 Thirdly, how will the clause deal with engines that have variable strokes? The Financial Secretary will appreciate that I am not offering him a sensorial opportunity. In vehicle technology terms, there are performance reasons for engines with such a facility, but it is not clear how the clause will deal with it.

Paul Boateng: Different strokes for different folks. As usual, the right hon. Gentleman—this time, donning his anorak—has asked for detailed clarification, and I shall do my best to accommodate him.
 It is important to realise that it would be inappropriate to include in a Bill the basis on which precise mathematical calculations are made. Secondary regulations normally cover matters such as the calculation of cylinder capacities for all vehicles. The clause is intended to firm up the primary legislative position in respect of such regulations, by which I mean that it corrects an anomaly. It will ensure that the Secretary of State has the right to say how cylinder capacity is calculated for all vehicles. 
 Rotary engines, or Wankel engines, are subject to the general rate, which I hope answers the right hon. Gentleman's specific question on that form of engine. 
 If the Committee takes the view that the proposed change should not be made, the power to make regulations to calculate the cylinder capacity for cars will be incomplete. The revenue might be challenged in such a way that it is threatened, unless the Committee gives the Secretary of State the powers in the clause, as I hope that it will.

Michael Jack: The Minister did not deal with the point at the heart of his last remark: what is the resolution mechanism, should a dispute arise over measurement?

Paul Boateng: It is the wisdom and balanced judgment of the Secretary of State, subject, of course, to proper oversight by the courts through judicial review. That is always the way, as the right hon. Gentleman well knows. I am sure that a resolution will be achieved using the primary legislation that the Committee is being asked to put in place and the secondary regulations that will be published in due course. I referred to the Secretary of State's wisdom, but we should not forget that there will be sympathetic and careful consideration of the issue, that advice will be readily proffered, as my hon. Friend the Paymaster General said, and that, if necessary, my learned friends will offer their assistance. There will be no need to go to the extremes that the right hon. Gentleman contemplates.
 Question put and agreed to. 
 Clause 20 ordered to stand part of the Bill. 
 Clause 21 ordered to stand part of the Bill.

Clause 22 - Disallowance of input tax where consideration not paid

Question proposed, That the clause stand part of the Bill.

John Burnett: The principle that credit for input tax should be adjusted if and to the extent that an invoice remains unpaid is entirely sensible and we support it. Despite the extra compliance burdens, we support the thrust of the clause. In other words, the purchaser or client who does not pay should not be entitled to the benefit of a value added tax credit in respect of tax that they have not paid. The clause places compliance burdens on the creditors who comply with the legislation, but there is a degree of uncertainty in the
 proposals which I should like to address. Perhaps we can persuade the Government to introduce greater certainty.
 The proposed six-month period runs from the later of the date of the supply or the date on which the sum becomes payable. There are two principal difficulties with that. First, the date normally recorded in the accounting records is the invoice date. As the Committee will know, the invoice may lawfully be provided up to 30 days after the time of supply or later if the commissioners permit. Secondly, the time when the consideration is payable is determined by the contract between the parties, and that is frequently a matter of custom. There is therefore a potential difficulty in identifying the expiry date of the six-month period. 
 A simple and straightforward amendment that the six-month period should run from the invoice date would be entirely sensible. It would add certainty for the thousands of business men who have to comply with the legislation and would avoid confusion. I look forward to hearing the appropriate Minister's comments on this basic, straightforward proposal.

Mark Hoban: I welcome the simplification that the clause provides for. The Government were right to lift the burden on businesses to notify their customers about claiming bad debt relief and I welcome that. Like the hon. Member for Torridge and West Devon (Mr. Burnett), I am concerned about the six-month rule and the burden that it will place on business. My own experience as an auditor is that often the sheer volume of relatively low-value invoices, some of which may not have been paid, is an issue in business. If a business were obliged to go through and identify those invoices after six months, the task would have to be done on a daily or monthly basis. That would constitute an onerous burden, particularly for smaller businesses.
 I wonder whether it would be more appropriate for smaller businesses to be asked to do this adjustment as part of their year-end accounting procedures, when businesses would normally examine their supply accounts and identify any unpaid invoices. The small business community would welcome that measure and see it as being in step with their own procedures. It would not require an additional compliance burden to be placed on them. 
 My second question is whether, for low-value invoices, a de minimis limit should be put in place so that the measures apply during the course of the year only when an invoice is for more than a particular value. Again, that would simplify matters for businesses of all sizes and prevent them from having to scroll through thousands of invoices on a regular basis. 
 I ask the Minister to consider further lifting the burden on small businesses by reconsidering the application of the rules. The Government often state 
 their commitment to lifting the regulatory burden. This would be a positive way of doing that and would demonstrate that their words were not empty. 
 I want to raise a further and slightly more technical point. Under the previous regime of having to notify customers that one had claimed bad debt relief, there was a concession for receivers of companies, who did not have to repay the input tax on certain debts. Will that concession remain, given the change to the regime outlined in clause 22?

Mark Field: I, too, want to speak briefly to the clause. I share the concerns expressed by my hon. Friend the Member for Fareham (Mr. Hoban) and the hon. Member for Torridge and West Devon about the risk that a more onerous compliance burden will be put on taxpayers. Speaking from experience, I know that nothing is more frustrating than looking at an invoice that has been unpaid for many months and realising, especially if it includes a large chunk of VAT, that one has already paid out on it although one has been unable to recover. The worry is that the invoice will become a fully-fledged bad debt further down the line. There is a risk that small business folk will be wary about throwing good money after bad in taking such matters forward if more and more paperwork is required. That applies particularly to small business people who are not well acquainted with financial auditing and who may have to get someone who runs their payroll to go through the whole rigmarole of engaging in correspondence with the Revenue or Customs and Excise to get the money back. Despite those concerns, the proposals in the clause are to be supported in principle.
 I agree with the technical comments made by my hon. Friend the Member for Fareham. An overhaul of liquidation is required. I know that much is being made about the proposed abolition of Crown preference in the Enterprise Bill, which will supposedly save small businesses between £70 million and £100 million a year. I should be interested to have some idea of whether that windfall will apply also to bad debts, where a fully-fledged liquidation is not in place.

Paul Boateng: This has been a useful debate, because it is important that we should constantly keep under review ways of reducing the burden on small and medium-sized businesses, in relation to paperwork and time engaged in dealing with VAT regulations and collection. Anything that clarifies thinking on that or takes forward that cause is to be welcomed, and I am glad that the Committee has, overall, warmly welcomed the clause. It will remove what is currently an onerous requirement: the need for a business to contact a debtor by post to inform him that it has made a claim for VAT bad debt relief. The clause has been welcomed by business.
 I can assure the hon. Member for Fareham that the particular tax concession to which he referred will continue to operate. I was probed on the Government's thinking about the six-month period and asked whether it should not be six months from the invoice date. That has a superficial attraction, but we must be careful that, in dealing with one issue, we 
 do not create other problems for small and medium-sized businesses. Our judgment sought to reflect the current flexibility in terms of the invoice date and the payment date. We did not want to tie the provision for one to that for the other; we wanted to retain the flexibility. That is why we concluded that there should be a clause whose effect would be to relieve suppliers making a claim for VAT bad debt relief of the need to issue the notification letter to their debtor customer. As part of the change, the debtor is required to repay any input tax claimed on supplies if more than six months have elapsed since payment became due. That was felt to be necessary so that debtors could no longer rely on the receipt of notification letters to inform them that their suppliers had claimed for bad debt relief. That was our thinking.

Michael Jack: Will the Financial Secretary give way?

Paul Boateng: I shall just finish the point, then I shall be happy to do so.
 It is important to stress that the change is being made in response to representations that we received from business prior to the Budget. They pointed out the unnecessary and onerous nature of the requirement on small businesses, as Committee members have done, and the change is an important part of the package. 
 A question has been asked about compliance costs. We are removing the most onerous requirements; it will be up to customers to monitor the timing of the payments so that they are aware when they are liable to repay the input tax. I shall be surprised if that represents any more than a routine requirement for most; it should not represent an additional requirement for the majority of businesses in that situation. Whatever burden exists should be switched from the supplier—who has, after all, acted in good faith—to the business that has defaulted on its payment. 
 Those are specific issues. The right hon. Member for Fylde might be coming in his intervention to one that will need to be dealt with by way of draft regulations. We are in consultation with business so that detailed issues can be resolved with the necessary input. The measures may then achieve that which they are designed to do—to lighten the burden on business.

Michael Jack: The Financial Secretary mentioned the relevant date and the date on which the sum becomes payable. What happens if an invoice has been rendered, but there is no expected date of payment because either it is not shown or the terms and conditions do not specify one, or no agreement has been reached between the parties regarding one?

Paul Boateng: In those circumstances there might be potential for dispute. Generally in such circumstances—for instance, if there is a dispute over pricing or delivery—if there is a failure to pay the full amount on time, due to the dispute, the customer is liable to repay the input tax claimed on the unpaid balance, but can claim it back once the dispute is settled and the full amount is paid. In the right hon.
 Gentleman's example, the date of payment will almost never be later than the date of the invoice. Provisions ensure—

John Burnett: Will the Financial Secretary give way?

Paul Boateng: May I deal with the point, and then give way to the hon. Gentleman?
 Provisions ensure that the relief needs to relate to the date from which payment is late. If there is no payment date, we take the invoice date, which reinforces the point that I made on flexibility.

John Burnett: I want to give an example for which the Financial Secretary's assertion is faulty. The date for payment in seasonal businesses can be much later than the invoice date.

Paul Boateng: I remind the hon. Gentleman of the flexibility to which I referred. The invoice date and the date of payment are not necessarily the same or linked. There may be good business reasons for a gap between the two, as he suggested. In those circumstances, obviously the parties would take the date most favourable to them, and the dispute would be dealt with in the way that I outlined.

John Burnett: The point that I tried to make was one that Customs might have made to the Financial Secretary. There must be certainty for Customs and Excise as well as for the people operating the tax.

Paul Boateng: I do not think that our proposal is unreasonable or uncertain. We have not received a representation from business to suggest that it is. Draft regulations will be laid on the implementation of the measure, and we are in consultation with business on their content. If the hon. Gentleman's point emerges from that consultation as one of the detailed issues that needs to be addressed—if he was right to point out, bearing in mind his constituency interest, that there may be special circumstances in relation to seasonal businesses—we would look to the draft regulations to deal with it. However, I do not sense that the issue has been raised with us to date as a problem in relation to the provisions, which overall have been warmly welcomed.

Christopher Chope: I am grateful to the Financial Secretary for that response and undertaking. He said that the measures had been widely welcomed. The hon. Member for Torridge and West Devon was referring to a point that has been made by the Chartered Institute of Taxation, which is concerned about the practicality of the measure and whether problems will be caused. I think that the Institute of Directors is concerned as well. If the Financial Secretary says that proper regard will be made to representations, to ensure that the new system is practical and not burdensome, obviously we accept those assurances.
 When the Financial Secretary replied to a question from my hon. Friend the Member for Fareham, was he confirming that, to quote the Chartered Institute of Taxation, the
''extra-statutory concession in Notice No 48 para 3.21 will be revised to meet the new conditions so that no adjustment is necessary if the six-month period falls after the 'relevant date' of the insolvency''? 
It would help if we knew that precisely.

Paul Boateng: Briefly, yes, I am confirming that in saying that the concession remains in place.
 I do not want to return to the point made by the hon. Member for Torridge and West Devon, other than to say that when detailed points need to be addressed in regulations, the consultation should enable that to happen. He gave seasonal businesses as an example of when there is delay in when payment is due, because that is the nature or custom of the business. That circumstance affects payment, but it will also affect relief, because the point from which bad debt relief applies will then also be delayed. If that is the nature of the business and of the supply, the relief will have to, and will, reflect that.

Mark Hoban: I have a final question relating to this clause and to clause 23 on the flat rate VAT scheme. We discussed clause 23 on the Floor of the House, which is why I now want to raise the point in the context of clause 22. If a business has taken advantage of clause 23, and has a flat rate of VAT and a reclaim of input tax based on a percentage related to its business, will clause 22 apply to it? Will it have to repay any input tax arising on invoices that it has not settled?

Michael Jack: I have one simple question. Can the Financial Secretary explain why the opportunity has not been taken, either in primary legislation or in subsequent regulations, to incorporate into law the extra-statutory concession in the interest of improving and simplifying the work of the tax system?

Paul Boateng: The link that has been pointed out between this clause and clause 23, which we debated on the Floor of the House, is a real one. I return to the point that I made to the hon. Member for Torridge and West Devon: the factor in that clause will have to, and will, be taken into account in this measure. It is a relief, and this is the context in which that relief is being sought--a context that will need to be taken into account.
 The right hon. Member for Fylde asked why we have not taken advantage of the opportunity to make an extra-statutory concession into a statutory one. I should have thought that he had been long enough in this game to know why. That the concession is extra-statutory is the nature of it. It is a concession and remains so. 
Mr. Jack rose—

Paul Boateng: I shall give way in a minute.
 I am not quite clear about what the right hon. Gentleman would otherwise want us to do. People will have the opportunity to benefit from the extra-statutory concession. Nothing that we have done interferes with that in any way.

Michael Jack: In his response, the Financial Secretary has suggested that what used to be the tradition has ceased—that every year, in the Finance Bill, Ministers would be presented with a series of extra-statutory concessions that either the Revenue or Customs and Excise had considered suitable for incorporation into mainstream tax law. What I sought was an explanation, not something unprecedented.

Paul Boateng: I understand that. That has not ceased, but remains as an extra-statutory concession. When an appropriate opportunity arises for it to be incorporated, the extra-statutory concession will be brought within the ambit of statute. The right hon. Gentleman has been around for long enough to understand that that is how it works. The concession is extra-statutory now, and people benefit from it; when an appropriate time comes to incorporate it into statute, it will be incorporated. There is nothing sinister or out of the ordinary there. The right hon. Gentleman will have witnessed that approach on many occasions.
 Question put and agreed to. 
 Clause 22 ordered to stand part of the Bill.

Clause 24 - Invoices

Question proposed, That the clause stand part of the Bill.

Christopher Chope: I have some simple questions. Will the simplified arrangements apply in all circumstances permitted by the directive? Will the maximum scope for outsourcing and self-billing be allowed? Can the Financial Secretary also help us on whether the United Kingdom is pressing for changes so that methods of guaranteeing origin and authenticity, other than electronic signatures and electronic data interchange, are also permissible?

Paul Boateng: We are in the process of inviting business to comment on the draft regulations. Customs consulted business during the agreement of the invoicing directive. That process is continuing because it will go on during the formulation of the regulatory changes. It has been very helpful to have the support of the Institute of Directors in relation to the clause. As hon. Members will be aware, the deputy head of its policy unit has written to me, applauding the progress that has been made with the invoice directive and the leading role that the Government played in that. I am mindful that the IOD wants burdens on to business to be minimised, as do we all. We shall do that by retaining the invoicing simplifications that are currently available, but also by building sufficient flexibility into the regulations to provide maximum scope for outsourcing and self-billing, and enabling the new electronic invoicing systems to be allowed as the technology develops.
 As the hon. Member for Christchurch knows, the field is one in which the technology is developing. In many ways it is developing faster than the pace at which fuel technology is developing. Customs will 
 continue the process of consulting business throughout the summer, through our joint-VAT consultative committee, which has proved a useful arena, as well as the e-VAT forum, during formulation of the regulatory changes. The European Commission will review the electronic invoicing provisions by 2008 and update the directive in line with technological developments. Meanwhile, Customs will identify with member states such as the UK who want to push ahead. It is always important to have a degree of flexibility when dealing with the Commission, as a number of Conservative Members will know. 
 We will be seeking to accept alternatives to advanced electronic signature or electronic data interchange. We are not just sitting back and waiting for things to happen; we are working closely with the sector to advance progress and retain and develop our competitive advantage. 
 Question put and agreed to. 
 Clause 24 ordered to stand part of the Bill.

Clause 25 - Relief from vat on acquisition if importation would attract relief

Question proposed, That the clause stand part of the Bill.

Christopher Chope: I wonder whether the Financial Secretary would respond to certain representations from one company that has written to the Secretary of State for Trade and Industry on 25 April. That company makes the following point:
 ''Many millions of pounds worth of taxpayers' money is being provided to help indigenous manufacturers, particularly in the knitwear industry locally. I am amazed that the Government can then contemplate a measure which would give purchasers of, say, overseas knitwear, an advantage over those who buy within the UK.'' 
The point being made is that the clause will give an advantage to those who import goods, compared with those who buy goods from domestic manufacturers.

Paul Boateng: First we had anoraks from the right hon. Member for Fylde and now we have woolly jumpers from the hon. Member for Christchurch. One wonders what it will be next. What does the hon. Member for Arundel and South Downs have in store for us? Who knows? However, the hon. Member for Christchurch makes an important and serious point, because we on the Committee must be aware of the effect that our decisions have on business people. It never comes amiss to hear specific examples of perceived impact.
 I could read out the entire list of goods covered by the Value Added Tax (Imported Goods) Relief Order 1984 introduced by the previous Conservative Government, but I do not think that I should detain the Committee in that way. However, let me give just a few examples. The goods include items donated for use in charity fund-raising events, forms, tickets and labels sent to UK travel agents by overseas tourist agencies and goods to be used in the construction or 
 upkeep of memorials dedicated to overseas war victims—a specialist but wide range of items. Therefore, the clause seeks to address a wide-ranging anomaly. 
 The clause is very modest. It recognises that way back in time there were oversights. In 1992, the term ''imports'' in VAT legislation covered all items brought into this country, whether from within or without the EU, and that meant that VAT relief was available on certain imported goods, regardless of the country of origin. With the onset of the single market, that changed. Goods brought into the UK from other member states came to be known in law as acquisitions. Unfortunately, the then custodians of the VAT legislation overlooked the need to make a corresponding change in the relief on certain imported goods, so the clause now seeks to correct that anomalous situation. 
 The clause does no more than that. It corrects the anomaly and puts those goods on an equal footing with zero-rated imports, as they should have been since 1993. It is a small technical change that corrects an unnecessary inconsistency in the law. It should be welcomed by everyone who wants a simpler tax system, and I believe that, on reflection, the hon. Member for Christchurch will find that his correspondent's fears about the matter are unfounded.

Christopher Chope: I am grateful to the Financial Secretary for that response. However, the correspondent was not writing to me. I have a copy of the letter with me. It was sent by a company chairman to the Secretary of State for Trade and Industry, addressing her as ''Dear Patricia.'' I am disappointed that the Financial Secretary does not have a copy of the letter and that he has not been invited by the Secretary of State to respond to it. It states:
 ''The point which concerns me is the proposal to ease the VAT regime for importers. I was particularly concerned about the cash flow advantages to importers inherent in the VAT regime many years ago and after strong representation by myself and others, the rules were changed such that importers were then at a cash flow disadvantage rather than an advantage which they had held before. 
 I now see a proposal which suggests that importers could again be put at a cash flow advantage compared to those who buy from EU sources and this I find totally unreasonable and unacceptable.'' 
I am not sure that anything that the Financial Secretary has said will allay those concerns.

Paul Boateng: I do not see what has changed or what the cash flow advantage is for importers. The explanatory notes state:
 ''Clause 25 inserts a new section 36A into the VAT Act. This gives a power to the Treasury to provide by order that no VAT will be payable on an acquisition of goods in the UK from another European Union Member State where VAT would be relieved on the importation of the same goods into the UK from outside the European Union.'' 
I really do not see what the Secretary of State's correspondent has to fear from the measure. I will certainly draw this particular exchange to the attention of the correspondence unit of the DTI, and I hope that 
 the correspondent will find it of some comfort. If he does not, he can write to ''Dear Paul'', and I shall reply as best I can.

Howard Flight: May I ask the Financial Secretary whether the clause comes as some relief to the fine art auction business in London? As I think he will be aware, the deal that we were forced to do with the EU has transferred about half of the international fine art market from London to New York. One of the problems, as far as I am aware, was the complexity of VAT, especially on objects coming from the rest of the EU into London. Will the strange semantic point about acquisitions and imports addressed in the clause be helpful to that market?

Paul Boateng: No. I do not necessarily accept the analysis that the hon. Gentleman has shared with the Committee on the state of the fine art market, but this
 clause has absolutely nothing to do with it. The current dispensation in relation to the fine art market was first granted by the Conservative party when in government and subsequently renewed by us. This clause addresses a completely different issue.
 Question put and agreed to. 
 Clause 25 ordered to stand part of the Bill. 
Angela Smith (Basildon) rose—

Joe Benton: Before I put the Question, I have an announcement to make. As from next Tuesday, we shall be sitting in Committee Room 10. I understand that the boxes and everything else will be moved after this afternoon's sitting. I give forewarning that we shall be in Committee Room 10 from next Tuesday.
 Further consideration adjourned.—[Angela Smith.] 
 Adjourned accordingly at twenty-one minutes past Eleven o'clock till this day at half-past Two o'clock.